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Electronic 1040x

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Electronic 1040x

Electronic 1040x Publication 926 - Introductory Material Table of Contents Future Developments What's New Reminder IntroductionTax questions. Electronic 1040x Future Developments For the latest information about developments related to Publication 926, such as legislation enacted after it was published, go to www. Electronic 1040x irs. Electronic 1040x gov/pub926. Electronic 1040x What's New Social security and Medicare tax for 2014. Electronic 1040x  The social security tax rate is 6. Electronic 1040x 2% each for the employee and employer, unchanged from 2013. Electronic 1040x The social security wage base limit is $117,000. Electronic 1040x The Medicare tax rate is 1. Electronic 1040x 45% each for the employee and employer, unchanged from 2013. Electronic 1040x There is no wage base limit for Medicare tax. Electronic 1040x Social security and Medicare taxes apply to the wages of household employees you pay $1,900 or more in cash or an equivalent form of compensation. Electronic 1040x Qualified parking exclusion and commuter transportation benefit. Electronic 1040x  For 2014, the monthly exclusion for qualified parking is $250 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $130. Electronic 1040x Reminder Additional Medicare Tax withholding. Electronic 1040x  In addition to withholding Medicare tax at 1. Electronic 1040x 45%, you must withhold a 0. Electronic 1040x 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Electronic 1040x You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Electronic 1040x Additional Medicare Tax is only imposed on the employee. Electronic 1040x There is no employer share of Additional Medicare Tax. Electronic 1040x All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Electronic 1040x For more information on Additional Medicare Tax, visit IRS. Electronic 1040x gov and enter “Additional Medicare Tax” in the search box. Electronic 1040x Credit reduction states. Electronic 1040x  A state that has not repaid money it borrowed from the federal government to pay unemployment benefits is a “credit reduction state. Electronic 1040x ” The Department of Labor (DOL) determines these states. Electronic 1040x If you paid any wages that are subject to the unemployment compensation laws in any credit reduction state, your federal unemployment (FUTA) tax credit is reduced. Electronic 1040x See the Instructions for Schedule H (Form 1040) for more information. Electronic 1040x Outsourcing payroll duties. Electronic 1040x  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Electronic 1040x The employer remains responsible if the third party fails to perform any required action. Electronic 1040x If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Electronic 1040x gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Electronic 1040x Photographs of missing children. Electronic 1040x  The IRS is a proud partner with the National Center for Missing and Exploited Children. Electronic 1040x Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Electronic 1040x You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Electronic 1040x Introduction The information in this publication applies to you only if you have a household employee. Electronic 1040x If you have a household employee in 2014, you may need to pay state and federal employment taxes for 2014. Electronic 1040x You generally must add your federal employment taxes to the income tax that you will report on your 2014 federal income tax return. Electronic 1040x This publication will help you decide whether you have a household employee and, if you do, whether you need to pay federal employment taxes (social security tax, Medicare tax, FUTA, and federal income tax withholding). Electronic 1040x It explains how to figure, pay, and report these taxes for your household employee. Electronic 1040x It also explains what records you need to keep. Electronic 1040x This publication also tells you where to find out whether you need to pay state unemployment tax for your household employee. Electronic 1040x Comments and suggestions. Electronic 1040x   We welcome your comments about this publication and your suggestions for future editions. Electronic 1040x   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Electronic 1040x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Electronic 1040x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Electronic 1040x   You can also send us comments from www. Electronic 1040x irs. Electronic 1040x gov/formspubs. Electronic 1040x Click on More Information and then click on Comment on Tax Forms and Publications. Electronic 1040x   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Electronic 1040x Tax questions. Electronic 1040x   If you have a tax question, check the information available on IRS. Electronic 1040x gov or call 1-800-829-1040 or 1-800-829-4933 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability at 1-800-829-4059) Monday–Friday from 7:00 a. Electronic 1040x m. Electronic 1040x –7:00 p. Electronic 1040x m. Electronic 1040x local time (Alaska and Hawaii follow Pacific time). Electronic 1040x We cannot answer tax questions sent to the above address. Electronic 1040x Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 11-Mar-2014

The Electronic 1040x

Electronic 1040x 3. Electronic 1040x   Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. Electronic 1040x Traditional IRA mistakenly moved to SIMPLE IRA. Electronic 1040x When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). Electronic 1040x It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. Electronic 1040x Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). Electronic 1040x This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. Electronic 1040x See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. Electronic 1040x If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. Electronic 1040x See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. Electronic 1040x What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Electronic 1040x See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. Electronic 1040x A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. Electronic 1040x These contributions are called salary reduction contributions. Electronic 1040x All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. Electronic 1040x The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. Electronic 1040x Contributions are made on behalf of eligible employees. Electronic 1040x (See Eligible Employees below. Electronic 1040x ) Contributions are also subject to various limits. Electronic 1040x (See How Much Can Be Contributed on Your Behalf , later. Electronic 1040x ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. Electronic 1040x See How Are Contributions Made , later. Electronic 1040x You may be able to claim a credit for contributions to your SIMPLE plan. Electronic 1040x For more information, see chapter 4. Electronic 1040x Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. Electronic 1040x Self-employed individual. Electronic 1040x   For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. Electronic 1040x Excludable employees. Electronic 1040x   Your employer can exclude the following employees from participating in the SIMPLE plan. Electronic 1040x Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). Electronic 1040x Employees who are nonresident aliens and received no earned income from sources within the United States. Electronic 1040x Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. Electronic 1040x Compensation. Electronic 1040x   For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. Electronic 1040x Wages, tips, and other pay from your employer that is subject to income tax withholding. Electronic 1040x Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. Electronic 1040x Self-employed individual compensation. Electronic 1040x   For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. Electronic 1040x   For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. Electronic 1040x How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. Electronic 1040x They are made on your behalf by your employer. Electronic 1040x Your employer must also make either matching contributions or nonelective contributions. Electronic 1040x Salary reduction contributions. Electronic 1040x   During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). Electronic 1040x You can choose to cancel the election at any time during the year. Electronic 1040x   Salary reduction contributions are also referred to as “elective deferrals. Electronic 1040x ”   Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. Electronic 1040x Matching contributions. Electronic 1040x   Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. Electronic 1040x See How Much Can Be Contributed on Your Behalf below. Electronic 1040x These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. Electronic 1040x These contributions are referred to as matching contributions. Electronic 1040x   Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. Electronic 1040x Nonelective contributions. Electronic 1040x   Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. Electronic 1040x These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. Electronic 1040x   One of the requirements your employer must satisfy is notifying the employees that the election was made. Electronic 1040x For other requirements that your employer must satisfy, see chapter 3 of Publication 560. Electronic 1040x How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. Electronic 1040x Salary reduction contributions limit. Electronic 1040x   Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. Electronic 1040x The limitation remains at $12,000 for 2014. Electronic 1040x If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. Electronic 1040x You, not your employer, are responsible for monitoring compliance with these limits. Electronic 1040x Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. Electronic 1040x The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. Electronic 1040x $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. Electronic 1040x The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. Electronic 1040x The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. Electronic 1040x Matching employer contributions limit. Electronic 1040x   Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. Electronic 1040x These matching contributions cannot be more than 3% of your compensation for the calendar year. Electronic 1040x See Matching contributions less than 3% below. Electronic 1040x Example 1. Electronic 1040x In 2013, Joshua was a participant in his employer's SIMPLE plan. Electronic 1040x His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). Electronic 1040x Instead of taking it all in cash, Joshua elected to have 12. Electronic 1040x 5% of his weekly pay ($100) contributed to his SIMPLE IRA. Electronic 1040x For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. Electronic 1040x Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. Electronic 1040x Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). Electronic 1040x Example 2. Electronic 1040x Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. Electronic 1040x 94% of his weekly pay contributed to his SIMPLE IRA. Electronic 1040x In this example, Joshua's salary reduction contributions for the year (2. Electronic 1040x 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). Electronic 1040x Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. Electronic 1040x In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. Electronic 1040x Matching contributions less than 3%. Electronic 1040x   Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. Electronic 1040x   For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. Electronic 1040x If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. Electronic 1040x Nonelective employer contributions limit. Electronic 1040x   If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. Electronic 1040x For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. Electronic 1040x   Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. Electronic 1040x Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. Electronic 1040x This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. Electronic 1040x Example 3. Electronic 1040x Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. Electronic 1040x Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. Electronic 1040x In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). Electronic 1040x Traditional IRA mistakenly moved to SIMPLE IRA. Electronic 1040x   If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. Electronic 1040x For more information, see Recharacterizations in chapter 1. Electronic 1040x Recharacterizing employer contributions. Electronic 1040x   You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. Electronic 1040x SEPs are discussed in chapter 2 of Publication 560. Electronic 1040x SIMPLE plans are discussed in this chapter. Electronic 1040x Converting from a SIMPLE IRA. Electronic 1040x   Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . Electronic 1040x    However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. Electronic 1040x When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. Electronic 1040x These rules are discussed in chapter 1. Electronic 1040x Your employer cannot restrict you from taking distributions from a SIMPLE IRA. Electronic 1040x Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. Electronic 1040x If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. Electronic 1040x See Additional Tax on Early Distributions, later. Electronic 1040x Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. Electronic 1040x Two-year rule. Electronic 1040x   To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. Electronic 1040x The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. Electronic 1040x   After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). Electronic 1040x Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. Electronic 1040x If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. Electronic 1040x If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. Electronic 1040x Prev  Up  Next   Home   More Online Publications